essentials of material control ''acccounting for materials''

To achieve managerial control on material ,there should be :
1.   proper cooperation and co-ordination among various department such as purchasing , receiving , inspection and store .
 2. Centralized purchasing system under expert and trained personnel .
3. Proper classification , codification and standardization of all items in store .
4. Proper use of stander printed form for requisition ,order ,issue ,return and transfer of materials .
5. Proper storage facilities to avoid loss from fire .theft , damages etc.
6. Proper perpetual inventory system that reflects the physical movement of material and their current balance.
7. Proper system of internal check  to ensure the transaction that are automatically checked .  
 

Need for Material Control / objective of Material Control (Accounting for materials)

Material control is needed for the following reason :
A. To purchase the material at the most economical price by considering quality discount without  compromising on their quality .
 B. To minimize the investment in material by  avoiding overstocking of material .
C. To make the desired quality and quality of material available when required for efficient and uninterrupted production .
D. To provide the information of material for the preparation of production plan , policies , purchasing plan .
E . To reduce the losses and wastage by implementing proper handling and controlling system.  

Material control (Accounting for materials)

The  main purpose of cost accounting is to minimize the cost of production .To achieve this objective , proper planing and effective control over material is to be exercised . Materials  control mean a systematic control over purchasing , store and consumption of materials .It is necessary to ensure the supply of right quality and quality of materials at right time & to prevent extra expenses on unnecessary purchase and improper use .It can reduce the losses and wastage of material through efficient purchase of material , their efficient strong ans efficient use or consumption .  

Type of material (Accounting for materials)

direct material and indirect material are the two type of materials  which are explained as follows :
1. Direct material : Material cost which can be easily identified in the finished product and allocated or charge to the product is a direct material cost . direct material generally become a part of the finished product such as leather in shoes , timber in furniture , sugarcane in sugar are the example of  direct material .
2 . Indirect material cost : material cost which cannot be easily identified with individual cost unit is indirect material . Nails used in furniture , thread use in stitching garments are the example of indirect materials . Indirect materials are small & relatively less expensive items , which are not main part of the finished product. Lubricating oil ,  consumable hand tools and store , materials used for repair and maintenance work are also the example of indirect materials .    

Accounting for material (meaning of materials)

material is an important element for manufacturing concern.  It covers the major portion of the finished product and constitutes nearly  06-70 percent of the total production cost . the term material refers to the physical commodities ( raw material , consumable store , maintenance part ) used to make the finished production from their crud in nature and need to be processed further .They consist component , consumable stores , maintenance  material , spare and tools .

objectives of book-keeping

The following are the important objective of book-keeping :
A . To identify financial transaction : book -keeping identifies financial transaction from a large number of business transaction to keep their record .
B . To keep permanent record : It keeps permanent record of financial transaction as and when they arise in a systematic order .
C. To classify transactions : It classical financial transaction into three types - personal , real and nominal and record them accordingly in a permanent book .
D . To prepare statement  : It help to prepare different statement to summarize , present and interpret the financial information contained in the routine record .    

origin and evolution of book-keeping

The origin of book- keeping cannot be exactly traced out .However , it can be said that the book- keeping as old as money . It has been practiced from the ancient period .It is believed  that the beginning of book-keeping system was associated  with the development of business and its inception . In ancient period the himself did conduct the business in a small scale and book keeping was not essential to that extent .The increasing demands and needs of human beings as well as  the practice of currency gradually began to influence the business activities. scientific book - keeping system then commenced in Italy some 500 years  ago . In a.D a person named Luca Pacific published a book entitled ''sum made Arithmetical '', in which he deal f with the modern principle of book -keeping for that first time . In that book -keeping , he included the following provisional about the book - keeping :
A . Memorial that is memorandum book .
B . gestational ,that is journal book .
C . quadrant , that is ledger Account .             

meaning & concept of book - keeping

The term ''book-keeping ' is amalgamated from two English word 'book & keeping '. the according of a business concern and 'keeping denotes the maintain . Therefore , book keeping  refers to the act keeping the accounting of a business concern and other organization .
                                                                    
                                                                  In regard to term ''book -keeping '', different scholar and instituted have put for ward their own ways . some of them are as follows :

In the words of prof R.N .carter :'' Book -keeping is the science and art  of correctly recording in the books of account .All those business transaction that result in the transfer of money or money's worth.''    

J .R . batlibai Defined  '' book -keeping is the art of recording business transaction in a systematic manner .''

Function of accounting

The main function of accounting are discussed below:
I . To keep complete and systematic record :
                                                                    The main function of account is to keep complete and systematic record of business transaction according to specified rules . This function is achieved through book- keeping which is an integral part of accounting .
II . To ascertain the net profit and loss :
                                                           To ascertain the net profit earn or loss suffered on account of business transaction during the particular period is the next function of accounting . it help in ascertaining the fact whether the business firm has been running in profit or loss in a certain period . this function is achieved by preparing a statement which is known as income statement or profit and loss account .
III . To ascertain the financial position :
                                                           It also ascertain the financial position of  the business at a certain period . a statement is prepared in order to represent the total property and liabilities of the firm at a defined time which is described as 'balance sheet' or 'position statement . 

objectives of accounting

The primary objectives of accounting are given below :

  A . To maintain record of business : The main objectives of accounting is to maintain proper record of business transaction .Now-a -day the volume of transaction is so large that a human memory cannot absorb each and very transaction so it is very essential to keep proper and complete record of all business transaction . The record can be used as and when required by the person interested in the business .

B. calculation of profit or loss :
                                                 profit is a measure of the performance of an enterprise .To ascertain profit or loss made by enterprise as the end of accounting period is the next objective of accounting . for this purpose trading and profit and lose accounting is prepared

C . presentation of the financial position :
                                                              The financial portion of a business concern is shown by balance sheet . Balance sheet is a statement of assets and liabilities . the balance sheet of assets menu external  liabilities shows the capital or owner's equity . It also show the solvency position of the business , if assets are more then external liabilities , it is solvent in case of reverse , it is an insolvent .

D . To help determining the tax amount :
                                                             accounting is also helpful in computation of correct liabilities relating to income tax and other taxes .



 

Importans of Account

The record of economic transaction is important in personal life , business organization social institution as well as governmental bodies too. The main benefits and the importance of  accounting are as follows :
I. knowledge on profit and loss : Due to the maintenance of the authentic record about the complete economic transaction of the firm .
II. Financial analysis and interpretation : On the basis of the systematic record ,financial condition of the firm com be analyzed interpreted .
III. Detection and prevention of errors and frauds : On account of the scientific , systematic and regular  book- keeping of the firms economic transactions , errors and frauds can  be detected and prevented .         

scope of Account

Accounting is importations in professional business organization .social institution as well as governmental bodies
too. so its scope is unlimited .The accounting has the following different areas .
A. Help to trading concern : Accounting records the entries transaction of a business concern .
B. Help to non- treading concern : The institutes established without intending to profit are know an non-treading concern  .
C. Helps the government : The government collects the receipt in terms of tax , donation from donor countries , loans from financial institution revenues from  government companies etc .   
D. Helps to professional and individuals : The record of receipt and payment is importance in personal life or individual as well as professional.  

Basic Accounting conceppt

The rules of action or conduct which are derived from experience and practice and when they prove to be useful that are called as '' General Accepted accounting principle (GAAP)".  Those rule have been commonly accepted by the professional accounting world    as general guidelines for preparing accounting .
                                    A brief explanation of some accounting concept and convention is given in the following paragraphs

(i) Business entity concept (Assumption) :- For accounting purpose , a business is treated as a separate entity .
It is distinct from its owner and all other economic activities . Under this concept , it is assumed that the business enterprise exists its own rights .The affairs of the business should not be mixed up with the private affairs of owners or other persons associated   with it. A true picture of the financial condition of a business enterprise can be represented with the help of this concept .
 (ii) money measurement concept (Assumption) : All business transaction are expressed in terms . This assumption is supported  because the monetary unit is relevant , simple and understandable . those transactions which cannot be processed in terms of money cannot  be recorded . The reforge they should be ignored.
(iii) going concern concept (Assumption ): According to this concept , it is assumed that the business will continue in future for at least a reasonably long period of time . It is assumed that the business gad an indefinite life unless  it is likely to be sold or wound up in the near future . That is why ,it is also called the continuity  assumption .         

meaning &concept of accounting

accounting is often called the language of business because it provide information to manager , owners costumer . investors and other decision maker  in side   and out side an organization it is the process of  analyzing, calcifying and interpreting business transaction in financial or monetary terms .
                                                                     like book- keeping accounting  has also been defined by different scholars and institution , for better understanding of the  terms some of the note definitions are given below :
            American institute of certified public accountants defines account as "the art of recording , classifying and summarizing , in a signification manner and in terms of money transaction and event which are  , part at least ,of a financial characters and interpreting the result thereof . American Accounting  Association has defined the Accounting in a broad sense ." Accounting is the process of identifying , measuring and communicating economic information to permit informed judgment and decisions by user of the information .In the words of R. N. Anthony ."Accounting system is a means of collecting , summarizing analyzing and reporting in monetary terms the information of the business ."  
                                               accounting to bier man and Derwin: "Accounting may be defined as the identifying measuring recording and communicating of financial information ."
                            Thus it is clear from the above definition that accounting is a science of recording transaction of economic nature in a systematic manner and also an art of analyzing and interpreting them . The various step involved in the accounting process are as follows .
A. Recording of financial transaction .
B.  preparation of financial statement such as Income statement , Balance sheet ,statement of changes in financial position ,etc.
C. Analysis and interpretation of financial statement .
D. To communicate the result of analysis to all persons who are to make decisions to formulate future plant .